FX – losses are piling up

2016-09-30 Ken

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Making extra cash, and other topics related to money

The losses on my FX investments have been piling up these past few days.

The reasons are obviously:

ineffective actions by the BOJ (Bank of Japan)
raise in interest rates postponed in the US

My unrealized losses have reached 49,153 JPY.

That’s on a 200,000 JPY principal so close to a 25% loss on investment.

Geez.

But! No need to get gloomy I tell myself!

Regardless of the ineffective BOJ, record low interest rates are going to continue in Japan.
And when you look at the US, even though the increase was postponed for September, there could still be one by the end of the year.

So am I holding on to my position? You bet!

What’s this “swap point”?

So I was looking at my losses on my iPhone app and noticed this amount labeled “swap” right under where it shows my gains and losses.
The swap amount is like the only positive amount and every thing else is all red.

It turns out that this amount is called “swap points”.

The simple explanation of what a swap point is that its interest.
I’m selling the yen to buy USD.
As of now, the interest rates in the US are higher than that in Japan.
I’m receiving the differential as swap points.

How much am I going to be receiving as interest?

With DMM FX, the FX account that I’m using, I get 13 yen for 1Lot a day buying USD and selling yen.
I have 3 Lots so I get 42 yen a day that’s 15,330 yen an year.

I’ve deposited 200,000 JPY into the DMM FX account so if we call this the principle, that’s a 7.66% annual return.

Better than nothing I suppose while I hold on to the position.
But if the yen keeps getting stronger against the dollar, the losses on the position is going to eat up all the swap points.